Pricing credit default swaps with bilateral value adjustments

DOI10.1080/14697688.2013.828239zbMATH Open1294.91183OpenAlexW2061225585MaRDI QIDQ2879019FDOQ2879019

Authors Ioana Savescu, Alexander Lipton 

Publication date 5 September 2014

Published in Quantitative Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1207.6049

zbMATH Keywords

creditfinancedebtbilateral adjustment

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Credit risk (91G40)

Abstract: A three-dimensional extension of the structural default model with firms' values driven by correlated diffusion processes is presented. Green's function based semi-analytical methods for solving the forward calibration problem and backward pricing problem are developed. These methods are used to analyze bilateral counterparty risk for credit default swaps and evaluate the corresponding credit and debt value adjustments. It is shown that in many realistic cases these value adjustments can be surprisingly large.

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• Bilateral counterparty risk under funding constraints. II: CVA

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Cited in

(19)

• New model for pricing quanto credit default swaps
• Bilateral Credit Valuation Adjustment of CDS Under Systemic and Correlated Idiosyncratic Risks
• PRICING-HEDGING DUALITY FOR CREDIT DEFAULT SWAPS AND THE NEGATIVE BASIS ARBITRAGE
• Pricing of swaps with default risk
• Structural default model with mutual obligations
• Credit default swaps with and without counterparty and collateral adjustments
• Efficient solution of structural default models with correlated jumps and mutual obligations
• Transition probability of Brownian motion in the octant and its application to default modelling
• Counterparty risk pricing: impact of closeout and first-to-default times
• Bilateral XVA pricing under stochastic default intensity: PDE modelling and computation
• On the first hitting time density for a reducible diffusion process
• CASH-SETTLED SWAPTIONS: A NEW PRICING MODEL
• A stochastic partial differential equation model for the pricing of mortgage-backed securities
• Pricing credit default swaps with bilateral counterparty risk in a reduced form model with Markov regime switching
• Bilateral credit valuation adjustment for large credit derivatives portfolios
• Bilateral counterparty risk valuation on a CDS with a common shock model
• A multidimensional Hilbert transform approach for barrier option pricing and survival probability calculation
• A counterparty valuation adjustment calculation model of multi-counterparties credit default swap
• Extremal dependence for bilateral credit valuation adjustments

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